January 30, 2005
By TIMOTHY L. O'BRIEN
Switzerland
THE Rolls Royce of business conferences glides to its conclusion here today, capping a week of stimulating, high-minded discourse that makes the gathering such a hot ticket each year among chief executives, politicians, academics, journalists, the nonprofit set and the occasional celebrity.
Look, there's Angelina Jolie! Angelina, how is the world faring on the health and human rights fronts? Oh, my gosh! It's Bono! Bono, what needs to be done about African poverty? Hey, Richard Gere and Sharon Stone, how can we tackle the AIDS crisis?
But this 34th annual conference of the World Economic Forum also scored 23 heads of state, 72 cabinet-level ministers, and about 500 global business leaders. Among the attendees were Prime Minister Tony Blair of Britain; Bill Gates, the Microsoft chairman; Viktor A. Yushchenko, the new president of Ukraine; Sergey Brin and Larry Page, the Google co-founders; former President Bill Clinton; Senator Bill Frist of Tennessee, the majority leader; and the South African novelist Nadine Gordimer.
Amid the panel discussions on global crises, technological innovation and effective management was a seminar, scheduled for Saturday, on "Star Power and Social Change." The literature for that one stated that "celebrities have become powerful advocates for social, political and economic causes" and asked this tough follow-up question: "What accounts for this trend?" (For executives who do not want to shell out $37,600 in annual membership fees and charges to attend next year's panel, here is one possible four-word answer: Because they are sexy.)
It is easy, of course, to take potshots at the forum, perhaps the only conference that bills itself as "Committed to Improving the State of the World." The world is, after all, a very big place. It is also easy to poke fun at a conference that advises invitees to monitor their own greenhouse gas emissions: the forum provided a handy formula to determine how much carbon dioxide each guest was likely to produce during the week.
Yet the Davos conference is not so easily dismissed. This year's agenda, gathered under the theme of "Taking Responsibility for Tough Choices," required attendees to consider topics as wide-ranging as world trade, pollution, poverty, globalization, American leadership, Islam and the Middle East, China's meteoric economic ascent, corporate governance, AIDS and other health care issues, financial corruption and weapons of mass destruction.
Moreover, many of the forum's 2,250 participants appeared to be fully engaged by its spirit and goals. Mr. Gere gave one of the gathering's most informed and passionate speeches addressing the AIDS crisis. Ms. Stone deployed her star power to great effect on Friday, rallying attendees at a poverty seminar to contribute $1 million to fight malaria in Tanzania. But beyond the high-caliber guest list, ambitious agenda, breathtaking Alpine setting and extraordinary food and wine, does the forum amount to anything more than Oscar-worthy hobnobbing?
"If we didn't exist someone would need to create us," said Klaus Schwab, the forum's founder and executive chairman. "Global challenges are not solved by business alone, by politics alone, by not-for-profits alone. They are solved by collaboration, and it requires a multi-stakeholder platform."
Business leaders, by far the forum's dominant cohort, as well as some academics and nonprofit leaders who attended, said the quality of the discussions made the event worthwhile.
The forum also allowed for those random moments when Michael Dell, the Dell Inc. founder, was suddenly standing next to you at the urinals; when Craig O. McCaw, the cellphone service pioneer, gently sidled up next to you at a reception; or when the currency speculator George Soros and the political guru David Gergen were at your shoulder, deep in conversation.
"Obviously, I see value in the conference," said N. R. Narayana Murthy, chairman of Infosys Technologies of India and co-chairman of this year's forum. "I don't know of any other conference that brings together politicians, artists, brilliant physicists, Nobel laureate winners and spiritual leaders.
"At Infosys we have a saying: 'You can disagree with me as long as you're not disagreeable.' And to me, Davos represents that. If you are open-minded you listen to others, and if you listen to others you become more open-minded."
BUT some of the forum's critics say that the reasons for attendance are less lofty. Activists have zeroed in on the forum in recent years, saying that the meeting's emphasis on free markets and free trade amount to camp counseling for money-grubbers. Others say that most participants jockey hard for invitations so that they can have access to one-of-a-kind networking opportunities or lucrative business deals, not because they want to promote social change.
"It's rich and powerful folks licking each other from top to toe and feeling good about it," said Andrew Hilton, director of the Center for the Study of Financial Innovation, a London organization that analyzes financial risks and opportunities. "Davos used to be good, but now it's overstuffed and postprandial because it's protecting privilege rather than finding new opportunities. It doesn't have that hunger anymore."
Conceding with a chuckle that his critique may stem from "sour grapes because I've never been invited," Mr. Hilton also said the forum was more than a retreat for the high and mighty. "It gets sort of slogged off as a gabfest, but it's terribly intense," he said. "Klaus Schwab is a genius and he's the Bill Gates of symposiums because he's invented Davos Man and Davos Man rules the world; it's capitalism without frontiers."
Although the forum is indisputably Mr. Schwab's creation, "Davos Man" as a concept first took root in the imagination of Samuel P. Huntington, a political science professor at Harvard. In an influential and controversial essay published in 1993, he argued that "Davos Culture" symbolized a highly educated and financially privileged Western elite out of touch with real-world threats. (Though the news media often credit him with coining the term "Davos Man," he never used it in his essay.)
His essay inspired a 1996 book, "The Clash of Civilizations and the Remaking of World Order," which posited a schism between Western and Islamic cultures so profound that it would lead to confrontation. Criticized as incendiary when it was published, the book got renewed traction after the Sept. 11, 2001, terrorist attacks. The book also warned of what it described as China's challenge to Western hegemony.
"What I'm saying is that we're developing a culture that is shared by most of the important people in the world, and Davos is one way in which the concerns of the elite are being worked out, and in that sense Davos plays a very important role," Professor Huntington said in a telephone interview before the forum. "Now, as I point out in the book and elsewhere, those people represent a very small percentage of the population of the world. A divide exists, and elites are going to face resistance because of that and they need to pay attention to public opinion."
At an opening-day meeting to determine priorities for the week's agenda, some parameters of Davos culture were on display. Some 750 participants identified poverty, equitable globalization and climate change as central issues confronting the world. But demographic information that emerged from computer-generated responses to more personal questions showed the relatively narrow cast of the forum's membership.
According to the data, 66 percent of the respondents were men, 69 percent were in their 40's or 50's, and 70 percent were from Europe and North America. Despite the forum's focus on China and the Middle East, just 15 percent of the respondents were from the Asia-Pacific region and only 8 percent were from the Middle East. And only 4 percent of the respondents identified themselves as Latin American.
As for careers, 50 percent of the respondents were from the business world. Among the rest, 9 percent were from the media, 9 percent from academia, 8 percent from nonprofit groups, 6 percent from government, 4 percent from science and medicine and 3 percent from the arts.
That business executives, and issues close to the needs of Western business, have primacy here stems from the forum's founding in 1971 as a mini-business school that tried to replicate M.B.A. programs in the United States.
PROFESSOR SCHWAB, who is 66, was born in Germany just before World War II. He said he became part of a postwar youth movement that was internationalist in outlook. He had a doctorate in mechanical engineering from a Swiss university and was working on a doctorate in economics when he unsuccessfully applied to the Harvard Business School in the mid-1960's. Determined to go to Harvard, he enrolled in what is now its Kennedy School of Government and received a master's in public administration.
Returning to Switzerland, he briefly managed a machinery company and, in 1969, became a business professor at the University of Geneva. Two years later, Professor Schwab started the European Management Conference, as it was known until 1987, when he changed its name to the World Economic Forum.
"I felt that to shake up Europe and expose people to the most advanced management concepts would be a good thing," he said. The first year of his meeting was a hit, he said, but attendance soon withered because participants could get more sophisticated training in the United States. But the twin shocks of floating exchange rates and the oil embargo of the mid-1970's made executives seek more global approaches to management. Attendance at the forum, which began loading its agenda with geopolitics and other nonbusiness topics, took off.
PROFESSOR SCHWAB pursued big American banks, corporate chief executives and Harvard Business School as early partners and tried to focus meetings on the global issues and promising regional economies of the moment. Over the years, that meant an agenda that embraced Latin America before moving on to Eastern Europe and Russia and then jumped into a feverish flirtation with Internet entrepreneurs just before the dot-com bubble burst in 2000.
In the late 1980's, politicians also found that Davos was an excellent place to make groundbreaking diplomatic statements, so that the forum also became an important foreign affairs platform.
Over the last decade, Professor Schwab and the news media studiously courted each other. That helped turn the forum into something of a cult event and gave the press an unusually hefty presence. The New York Times and its sister publication, The International Herald Tribune, for example, had more than a dozen reporters patrolling Davos's slippery, scenic side streets this year. Journalists have also become an integral part of the forum's machinery, with many moderating some of the gathering's most prominent panels.
The forum's operating budget comes largely from dues from about 1,000 corporate members; they must have at least $3 billion in annual revenue to join. Professor Schwab estimated that 75 of the top 100 companies in the Fortune 500 were members. For the year ended last Sept. 30, the forum had income of $62.3 million, expenditures of $61 million and an endowment of about $11.7 million.
"Davos is a mirror of the global agenda," Professor Schwab said. "It's very complex, very diffuse and very demanding."
Although the forum has embraced the challenge of uniting distinct constituencies - technology mavens, foreign policy leaders, corporations, and nonprofits - the gathering in Davos this year often felt splintered. Artists and nonprofits did not really drive the forum's agenda as much as entrepreneurs and executives who scrambled to get into "governors' groups": small, invitation-only events, led by industry leaders, that offered a mix of market insights and the possibility of a post-Davos business transaction.
Professor Schwab said he believed that about 50 percent of the corporate membership was enthusiastically committed to the forum's goal of uniting politicians, businesses and nonprofits to improve the world. He described an additional 30 percent as "loyal" but said that they attended only the forum's events in Davos and were not involved in many initiatives the organization pursues the rest of the year. He called the remaining 20 percent "followers."
"They are not really interested in the institution, to be frank," he said of this last group. "They are interested in the networking."
All of these factors give the Davos meeting a split personality. The fact that about 3 billion of the earth's 6.4 billion people get by on roughly $2 a day was highlighted in a number of briefings last week. But the forum still squeezed in a seminar called "Hedge Fund Fever Heats Up" at the same time as a discussion on financial solutions to poverty. The hedge fund seminar included the Moore Capital Management founder Louis Moore Bacon among its panelists. A panel on Thursday instructing investors on "Spotting the Next Bubble" filled up early, while another in the same time slot, "Does Business Have a Noble Purpose?," remained wide open. No sign-up was required for a seminar titled "Does Human Rights Pay?," but "The Impact of Broadband" was booked quickly. Some chief executives acknowledge that doing business is an important part of their annual trip to Davos, but they say that over all, they attend because the event is uniquely informative and intellectually challenging. "The reason to go, on a purely intellectual basis, is you can very efficiently sample the sum of what the world really thinks," said Eric E. Schmidt, Google's chief executive. "Understanding is actually worth a lot, and it's always amazing to me how people underestimate the value of understanding."
A number of participants from nonprofit organizations said the conference had enormous appeal to them because it provided rare access to corporate executives - and because the groups' needs and interests garnered serious attention.
"Not all C.E.O.'s are pillagers of the earth," said William R. Pace, executive director of the World Federalist Movement, a nonprofit group that promotes global democracy and international laws. "Many of them have deep concerns about social issues, and the forum is an effort to create a dialogue.
"I'm absolutely convinced there's been an important exchange and broadened dialogue between nonprofits and corporate leaders that wouldn't have occurred but for Davos," he added. "I think it has a very profound impact, but how measurable that is is another question."
Two goals of the forum are to help executives anticipate and prepare for risks and to have businesses make on-the-ground contributions in needy countries or regions.
On the risk assessment side, the forum has had some lapses. During the 1990's, when it promoted free markets, freely traded currencies and rapid globalization, it failed to anticipate some of the geopolitical upheaval engendered by those changes, which left countries like Argentina and Russia with highly skeptical views of Western powers and market dynamics.
Last year, the forum hired Ged Davis, a former corporate strategist at Shell, to oversee its risk assessment and strategic insight arms. Mr. Davis said the forum planned to knit more closely its economic research capabilities with the views of geopolitical and economic thinkers who were part of the organization.
As for the on-the-ground initiatives, the forum has assembled a list of estimable projects. "We're trying to bring together various stakeholders to address issues and promote problem-solving," said Mark Adams, a forum spokesman. "We don't see ourselves as a conference or some sort of gabfest. We see what we do as a year-round process, of which the forum is a highlight."
SEVERAL years ago, the forum established its Disaster Relief Network; that group recently helped get Sri Lanka's main airport up and running a few days after the Indian Ocean tsunami. And the forum has sought to increase AIDS awareness; multimillion-dollar contributions to fight the spread of the disease have been announced in Davos by the Bill and Melinda Gates Foundation. (Last Monday, the foundation announced that it would donate $750 million to support immunization programs through Unicef.)
The forum has also made "bridging the digital divide" one of its priorities. It said that it had worked with 30 businesses to donate time and computer technology to help modernize teaching methods in schools in Jordan - and that it planned to try to start the program in other Arab countries as well.
Academics in Davos said they welcomed such initiatives. The forum "convenes a vast array of institutions and leaders and has the potential to create new partnerships that will make a very real difference for people and communities in need around the world," said John J. DeGioia, the president of Georgetown University.
"The issues raised here," he added, "are of deep interest to many members of the Georgetown community, and I believe that higher education can and should play a key role in responding to some of them."
For now, however, the forum's initiatives are not its claim to fame. When people think of Davos, they often think of those effervescent moments when political leaders have taken center stage. In 1994, for example, Shimon Peres and Yasir Arafat reached a draft agreement here on access to the Gaza Strip. And in 1992, F. W. de Klerk, the South African president, met here with Nelson Mandela and Mangosuthu Buthelezi, the Zulu leader.
Although the forum has had less diplomatic drama recently, its proponents said such moments pointed to the fact that not all its accomplishments can be quantified - and that much of what it achieves necessarily begins with words. Those words, they said, amount to much more than influential highfliers rubbing shoulders and brokering deals for a week.
"If you take action it starts with dialogue," Mr. Adams said. "So we shouldn't apologize for dialogue."
